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DRAM and component shortages becoming critical

Demand outstripping supply

It looks as though there's going to be a long, hot summer in store, as shortages of components in several key sectors begin to make their presence felt.

Electronics companies are being forced to scour the world for vital spare parts and, in some cases, push back product launches.

Nowhere is this being felt more than in the computer memory and LCD markets.

The recent price trend of computer memory reflects this pattern best. The spot price of a 64MB SDRAM (synchronous dynamic random access memory) chip is around £5 per chip at present from a low of less than £3 per chip in February.

The prices are still way off the highs of £13 per chip seen last year after the Taiwanese earthquake. But the pricing trend is clearly up, and a solution could be a year or more away.

The bad news for users is that this all adds up to higher prices for retail systems and devices.

With plants now operating at maximum capacity, the only way to increase the number of chips coming onto the market is to build new factories and that can't be done overnight. Additionally, chip industry executives are concerned that even with the new capacity, it may not be enough to keep up with the faster expanding demand.

"Our total wafer capacity is limited," said Keichi Shimakura, associate senior vice president at NEC, one of the world's largest semiconductor manufacturers. "We are investing in new technology and new plants but maybe it won't be enough to catch up."

The root of the problem can be traced to several factors, said Shimakura. First, the number of devices that require memory chips is multiplying as mobile phones, digital audio players, PDAs, and digital
televisions all begin to become more common. The amount of memory being put into existing devices is also increasing.

Industry experts are warning that shortages of DRAM chips, which are used as main memory in PCs, may further compound the woes of vendors who already are reeling from chip giant Intel's inability to supply sufficient volumes of its high-end Pentium III processors.

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